Billionaire Elon Musk and all 11 members of Tesla’s board of directors have been named in a shareholder lawsuit claiming the Tesla CEO’s “unchecked misstatements on Twitter” have harmed the company.

The lawsuit was filed March 8 in the Delaware Court of Chancery by the Laborers’ District Council and Contractors’ Pension Fund of Ohio, a Tesla shareholder.

The plaintiffs seek a declaratory judgment and a permanent injunction against Musk over “his unchecked use of Twitter to make inaccurate statements about the company.” They are also pursuing an unspecified amount in monetary damages.

Join CCN for $9.99 per month and get an ad-free version of CCN including discounts for future events and services. Support our journalists today. Click here to sign up.

In a statement, the Delaware law firm of Grant & Eisenhofer — which is representing the shareholders — trashed Musk over what they consider his reckless tweets.

The plaintiff’s lawyers also torched Tesla’s board, saying they breached their fiduciary duty by “failing to rein in” Musk when he posts tweets concerning Tesla’s business operations.

“Mr. Musk has continually disregarded all efforts to rein in his material misstatements on social media.”

“He has ignored federal court orders, a settlement with the SEC, and even his company’s own corporate policies expressly requiring that any of his tweets regarding Tesla be pre-screened.”

“His conduct has not only cost Tesla shareholders dearly, but threatens to expose the company to even greater liability and litigation in the future.”

“The Board of Directors has been completely ineffective. And in fact, Tesla still identifies Mr. Musk’s personal Twitter account as a source of official disclosures by the company. It has to stop.”

All 11 Tesla Board Members Being Sued

The lawsuit is currently under seal. However, a public version will be made available by March 12.

Tesla has 11 members on its board of directors (including Musk). They are all being sued.

Brad Buss

Robyn Denholm

Ira Ehrenpreis

Larry Ellison

Antonio J. Gracias

Steve Jurvetson

Kimbal Musk

James Murdoch

Linda Johnson Rice

Kathleen Wilson-Thompson

Elon Musk.

The full case caption is Laborers’ District Council and Contractors’ Pension Fund of Ohio, Gloria Lupkin, and Jeffrey H. Kripitz on Behalf of Tesla v. Elon Musk.

Elon Musk Stepped Down as Chair Over Past Twitter Debacle

As CCN reported, Musk remained on Tesla’s board but was forced to step down as chairman in September 2018 pursuant to an agreement with the Securities and Exchange Commission over a controversial August 2018 tweet where he suggested that he might take Tesla private.

Under that agreement, Musk agreed to pay a $20 million fine to settle the SEC’s securities fraud charge. He also agreed to step down as chairman of Tesla’s board and have his communications be monitored by Tesla lawyers before he tweets.

In February 2019, Musk caused another uproar after posting a vague tweet about Tesla’s 2019 production projection. He later clarified his original tweet, but the damage was done — as shareholders were already up in arms.

Meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week. Deliveries for year still estimated to be about 400k.

SEC Filed Contempt Motion Against Musk

On February 26, Musk enraged the SEC by criticizing the agency when he tweeted, “Something is broken with SEC oversight.”

The SEC reacted by filing a contempt motion, saying the billionaire mogul violated his September 2018 SEC agreement, under which he agreed to get approval before tweeting anything that could impact Tesla’s stock price.

Critics noted that Musk’s tweet had no impact on Tesla’s stock price. However, Musk was already skating on thin ice because the SEC and some shareholders have been trying to remove him as CEO for a while.

Exactly. This has now happened several times. Something is broken with SEC oversight.

Other Tesla Shareholders Support Elon Musk

Meanwhile, some shareholders stand by Elon Musk and say Tesla will be as big as Amazon in a few years.

TSLA shareholder Cathie Wood, the CEO of ARK Invest, has no problem with Musk’s mercurial personality and says it’s just a matter of getting used to his flighty demeanor.

“Everybody is beginning to adjust for Musk,” Wood said. “Having been a portfolio manager for many years, I know how to adjust to what different CEOs say, given their personalities and their aspirations.”

About The Author

Samantha Chang is a financial editor who writes about politics at BizPac Review and about business at CCN. She is a law school graduate and an alum of the University of Pennsylvania who enjoys finance, flowers, and fitness. You can follow her on Twitter at Samantha_Chang.